While late payments can be an issue for SMEs at the best of times, they can be especially relevant over the holidays. Let’s look at how you can manage your cash flow and navigate tardy invoices that have the potential to set any good money manager off-track.
A recent Xero study shows New Zealand businesses get paid on average of 6.4 days late costing the small business economy $456 million dollars annually. businesses get paid on average of 6.4 days late costing the small business economy $456 million dollars annually.
Understandably, this is having an impact on SMEs and their cash flow. A recent report released by MYOB Business Monitor found that 38 per cent of SMEs are stressed about late payments, while 42 per cent are worried about cash flow.
This is only likely to become more of a problem over the holiday season when payroll departments and approving managers take breaks and invoices are often put on the backburner.
Expedite payments by charging interest
When companies know non-payment will hurt their bottom line, it might motivate them to settle the account. Ensure your invoices state the payment due date clearly (30 days is the standard period). If you have an overdue interest provision in your invoice, it should be included in the payment terms.
Finally, it is generally recommended that invoice late fees are capped at around 10 per cent.
Leverage technology to set automatic reminders
Chasing late payments can be stressful and time consuming, setting up automatic reminders in your accounting system delivers a more effective result. According to Business Gov NZ, Xero has found that in the first 25 days after payment is due, overdue invoices with reminders get paid an average of four days sooner than those without.
Here at ScotPac, we offer a range of Business Finance solutions that can help you manage your cash flow over the busy festive season. Our team of lending experts can help you unlock the capital and tailor a solution best suited to your business needs.
Use our simple enquiry form or give us a call, and our team can get to work on securing the funding your business needs to thrive.
Don’t forget to look out for more insights in the weeks ahead as we dive deeper into the pitfalls and solutions facing many New Zealand businesses ahead of a much needed holiday period for most!